Tax Tips Blog

Carl asks: The past two years I have listed some charitable donations on our Schedule A, but they have been cancelled by the AMT. Since my wife retired in 2006, I expect to avoid the AMT this year. Can we use those same donations from previous years this year, since they did us no good in the years they were made? I didn’t think so.

My response: Carl, you seem to be pretty confused about how AMT works, but don’t feel bad, it’s yet another complicated layer in our tax system. The AMT is a completely separate calculation from your regular tax calculation, but in order to make things “simple” we have one form to compute the difference between the two different taxes.

The “differences” on the AMT form are referred to as “adjustments” or “preferences”. As far as itemized deductions are concerned this adjustments include:

1. State and local income taxes

2. Home equity loans and lines of credit, if not used for home improvement

3. Medical expenses must exceed 10% of AGI instead of 7.5% to be deductible

4. Miscellaneous itemized deductions Contributions are not disallowed with the AMT calculation; therefore, even if you were paying AMT, you were still receiving the benefit of any deductions that you made.

Anyone who pays AMT should seek the advice of a qualified tax professional, because not only is the calculation itself complicated, you may be entitled to a Minimum Tax Credit in future years. The Minimum Tax Credit (MTC).

The MTC was created in an attempt to avoid double taxation when a preference item on AMT reverses itself. This calculation should only be done by a qualified tax professional.

Best wishes, Gina

Most taxpayers are aware that if they donate cash or personal items to a qualified organization they may be able to claim an itemized deduction for the fair market value of their donation. It is also pretty common knowledge among taxpayers that you are not allowed a deduction for the value or time of the services you provide. What many tax payers commonly neglect to deduct are the following…

You can deduct 14 cents a mile for each mile you drive for charitable purposes, plus parking fees and tolls. This includes your mileage to Goodwill or Salvation Army to drop off your old clothes and furniture. If you’re a weekly (or monthly or occasional) volunteer at a Hospice, Hospital, Cancer Center, etc. this mileage is all deductible.

Alternatively, you could deduct the actual costs of transportation, like gas, oil changes, parking fees, and tolls, but you would need receipts to prove them.

If you incur expenses while traveling away from home while performing services for a charity, including out of pocket costs for round-trip travel, taxi fares, and other costs of transportation between the airport, bus station, train stations and hotel, plus lodging and meals are deductible in full.

NOTE: These expenses are only deductible if there is no significant element of personal pleasure associated with the travel, or if your services for a charity do not involve lobbying activities. The cost of entertaining others on behalf of a charity, such as wining and dining a potential large contributor are deductible, but the cost of your own entertainment or meal is not deductible.

You can deduct the cost of your uniform (Hospital Scrubs, Cub Scouts, etc.) when doing volunteer work for the charity, as long as the uniform has no general utility. The cost of cleaning the uniform can also be deducted.

Remember, to document you charitable giving such that you can receive a tax break at the same time. Keeping a log book is the easiest way to make sure you don’t miss a deduction.

And make sure that the organization you are providing these services to a qualified organization. Publication 78, Cumulative List of Organizations described in Section 170(c) of the Internal Revenue Code of 1986, is a list of organizations eligible to receive tax-deductible charitable contributions. You can find this publication here.